Chapter 5

1. Chapter 5 Part III

2. Executive Orders Regulating Rulemaking • What is the president's authority over rulemaking? • What about for independent agencies? • Why should the president exercises authority over rulemaking? • Coordination of agencies? • Assuring that the agencies carry out the administration's objectives?

3. Regulatory Analysis • What is CBA? • Why is CBA sometimes very controversial, especially for environmental regulations? • What is the value of regulatory analysis? • What is PBA? • (political benefit analysis) • Why does it always trump CBA?

4. Cost-benefit and Risk-benefit analysis • Justice Breyer's tunnel vision problem • Each rule is seen without reference to all the other regulations • Thus each new safety rule may be cost effective, but the aggregate is not • Disaster Decision Making • This is always an issue after a disaster when politicians want to show they are doing something.

5. Environmental Cleanup Example • Why is this a problem in environmental law? • The cost of removing the last 5% of crap • What about asbestos and brown fields? • Why does HHS and the state continue to favor high tech medicine over primary care? • What is the CBA?

6. What are areas where CBA can have adverse effects? • Do the costs and benefits always fall on the same group? • How does the diffuse and long term nature of benefits complicate CBA? • Should we use CBA for health regulations?

7. Acronyms • OMB - Office of Management and Budget • OIRA - Office of Information and Regulatory Affairs

8. Executive Order 12866 • OIRA must review rules that have an impact of more than 100M aggregate or substantial impact on a segment of the economy or any thing else.

9. The Regulatory Philosophy • Federal agencies should promulgate only such regulations as are required by law, are necessary to interpret the law, or are made necessary by compelling public need, such as material failures of private markets to protect or improve the health and safety of the public, the environment, or the well-being of the American people. In deciding whether and how to regulate, agencies should assess all costs and benefits of available regulatory alternatives, including the alternative of not regulating.

10. CBA under 12866 • Costs and benefits shall be understood to include both quantifiable measures (to the fullest extent that these can be usefully estimated) and qualitative measures of costs and benefits that are difficult to quantify, but nevertheless essential to consider.

11. Choosing Among Alternatives • Further, in choosing among alternative regulatory approaches, agencies should select those approaches that maximize net benefits (including potential economic, environmental, public health and safety, and other advantages; distributive impacts; and equity), unless a statute requires another regulatory approach. • Pretty simple? :-)

12. What must the agency provide OIRA - I • An assessment, including the underlying analysis, of benefits anticipated from the regulatory action (such as, but not limited to, the promotion of the efficient functioning of the economy and private markets, the enhancement of health and safety, the protection of the natural environment, and the elimination or reduction of discrimination or bias) together with, to the extent feasible, a quantification of those benefits;

13. What must the agency provide OIRA - II • An assessment, including the underlying analysis, of costs anticipated from the regulatory action (such as, but not limited to, the direct cost both to the government in administering the regulation and to businesses and others in complying with the regulation, and any adverse effects on the efficient functioning of the economy, private markets (including productivity, employment, and competitiveness), health, safety, and the natural environment), together with, to the extent feasible, a quantification of those costs;

14. What must the agency provide OIRA - III • An assessment, including the underlying analysis, of costs and benefits of potentially effective and reasonably feasible alternatives to the planned regulation, identified by the agencies or the public (including improving the current regulation and reasonably viable nonregulatory actions), and an explanation why the planned regulatory action is preferable to the identified potential alternatives.

15. 12866 and Rulemaking • What if the statute says no CBA - can the president impose it anyway? • Why is there a special provision for analyzing impact on small businesses? • Does an executive order create private rights, i.e., can you challenge an agency's OIRA showing?

16. Statutory Requirements • National Environmental Policy Act imposes requirements if the rule affects the environment • Regulatory Flexibility Act - small business • Only direct effect on small business • Rules on small truck standards might affect small business owners, but since it is directed at manufacturers, small business owners do not have standing • Paperwork Reduction act - every rule that requires reporting must be reviewed • CDC newsletter cannot ask for reader feedback • Statutory requirements can create private rights

17. Congressional Review • Most rules, including those exempt from notice and comment, must be reported to Congress, which has 60 days to review them • There is a provision for emergency rules • What can Congress do if it does not like the rule? • When is this likely to happen? • What about independent agencies? • Why does this law not violate separation of powers?

18. Information Quality Act • Requires OMB to adopt guidelines ensuring and maximizing the quality, objectivity, utility, and integrity of information (including statistical information) disseminated by Federal agencies • Why is this a redundant requirement? • What could be the purpose of this requirement?

19. Unfunded Mandates • What is an unfunded mandate? • How is this stealth regulatory reform? • Unfunded Mandates Act of 1995 - Agency must do a CBA if the costs exceed 100M • What would be the impact of banning unfunded mandates? • What are the types and impact of unfunded mandates on public schools?

20. What Are The Potential Effects On Agencies of these Mandates? • Who benefits? • Who loses? • What is the financial impact? • Remember the rules: • Cost effective • Effective regulation • Due process and fairness to regulated parties • Pick two

21. Stopped here

22. Critiques of Regulatory Policy

23. Are We Better Off? • What has improved over the past 50 years? • Pollution? • Health? • Racism? • Do more people have more stuff? • What does it mean to be poor in the US over the past 100 years? • What has gotten worse? • Income disparities? • Role of expectations? • Are things absolutely worse, or worse in comparison with other individuals and countries?

24. Regulatory Successes • Food and drugs • Environmental regulation • Through the 1980s • Workplace safety • Civil rights • Banking • Lots of moral hazard problems, which blew up in 2008 • But no one lost insured deposits

25. Regulations that Did Not Work so Well • Airline rates and routes • Medical care? • Trucking rates and routes • Telecommunications • Who wins and who loses in economic regulations? • Small towns and rural areas? • Unions? • Big business? • The Rich

26. Why Doesn't the Public Trust Agencies? • What are examples of public distrust of agencies? • Oysters • Are these justified? • What is the impact of this distrust? • How is this distrust transformed used to justify not being taxed? • What about when there is a local problem? • How do the politics shift for national security? • What does Ron Paul say? • What happens to small government views when there is a disaster? • Or someone wants a levee, dam, etc.?

27. How Do We Make Political Choices? • Response to a crisis • Can work for specific narrow issues • Tends to not consider unintended consequences • Driven by lobbyists • Works best when it is not publically vetted • Think tax code • Cost-Benefit decisionmaking

28. Cost Benefit Analysis • How much should we spend to save a life? • Why does Congress refuse to put a price on human life? • Why does this make CBA more difficult? • How much to prevent injury? • How much should personal responsibility matter? • personal protective gear?

29. CBA Costs - Tables from Saving Lives: A Review of the Record • What is the problem with lives saved analysis? • Are they the same lives for different risks? • What about disability? • What are the most cost effective regulations? • Interesting that vaccinations and clean drinking water are not here • What are the most costly regulations?

30. Could We Spend the Money More Wisely? • What type of risks do we spend the most on with the least return? • Asbestos abatement of stable asbestos in buildings • Superfund risks • Overstated health risks - LA cancer corridor • What risks get the least attention? • Smoking? • Immunizations? • Primary care?

31. Should we do CBA at All? • Why not prevent all possible risks? • Precautionary principle • What are the trade offs? • How does the US concern with risks affect our cost of business production? • When can preventing one risk cause another? • Natural pesticides • Smaller, lighter cars • More expensive power?

32. Where does the Court Stand on Requiring CBA? • The enabling act is controlling • In AFL-CIO v. API, 448 U.S. 607 (1980), the court found that OSHA enabling act required CBA on standards for benzene • In American Textile Mfrs. Institute v. Donovan, 452 U.S. 490 (1981), the court found that OSHA did not have to do CBA for cotton dust standards because it was not required by the statute directing regulation of cotton dust.

33. Regulatory Dilemmas

34. FDA • What are the tradeoffs in FDA regulation? • Safety/Effectiveness • Should cost be part of the equation? • Why are consumers in a poor position to judge drugs? • Background Information? • Timeframe of action? • Comparison with other drugs? • What is drug lag? • Why not let the market sort it out? • What is the market mechanism - think Vioxx

35. Non-Agency Regulation: Tort and Compensation Law • How is tort law a regulatory process? • Is it a democratic process? • What is the public input? • Who protects the public's interest in tort cases? • What are the standards for scientific decisionmaking? • Breast implants? • Erin Brockovich? • What are the standards for CBA? • What if later evidence shows that the verdict or settlement was wrong?

36. Economic Incentives and Taxes for Environmental Risks • Tradeable permits for a fixed amount of pollution • Looks at total pollution or greenhouse gas, not process of control • Lets industry see who can do it the most efficiently • What if you are downwind? • Does an aggregate reduction, which benefits more people, make you any happier? • Carbon Tax • Goes to the heart of the CO2 program • What are the downsides?

37. CBA - Federal Flood Insurance • Should the feds provide flood insurance? • Why does it not work in the private market? • Why are the political pressures on the feds? • Do local communities really want accurate flood maps? • Do people really want accurate storm probability predictions? • Are the feds really going to charge accurate premiums? • What are the perverse incentives of the program?

38. CBA: Should We Rebuild New Orleans? • Would NO be in better or worse funding position if they had properly evacuated the folks before Katrina? • What is the CBA for real evacuations? • What is the CBA for rebuilding? • What are the trade-offs?

39. Who Should Pay? • Should folks in low risk areas subsidize the Big Easy lifestyle? • How about rebuilding rich folks houses on the Mississippi coast? • What about the responsibilities of the homeowners? • Should we bail them out when they do not buy insurance? • What message did Road Home send to people who did buy flood insurance?